Member State option for delaying ESEF in the EU Official Journal
An amendment to the Transparency Directive was published in the European Union (EU) Official Journal. EU Member States (MS) may allow issuers to apply the European single electronic format (ESEF) for financial years beginning on or after 1 January 2021 instead of 2020. MS should notify the European Commission (EC) before 19 March 2021 of their duly justified intention to allow the delay.
We note that many MS have already notified the EC.
Green MEP renews calls for revamp to EU audit rules
Member of the European Parliament (MEP) Sven Giegold (Greens-EFA/Germany) has issued a statement in response to the latest reports on Wirecard from Germany.
Giegold criticises the focus of Wirecard discussions on mandatory audit rotation and increased liability caps. Instead, he argues that the main problems are that auditors are paid by the entities that they audit, and ‘parallel consulting business’ co-exist in audit firms.
ESMA’s stakeholder group issues opinion on Wirecard
European Securities and Markets Authority’s (ESMA) Securities and Markets Stakeholder Group (SMSG) issued its ‘initial overview report’ on Wirecard on 1 March. It includes a set of recommendations to address what SMSG sees as the major shortcomings that led to fraudulent reporting by the German fintech firm.
SMSG’s opinion also includes some audit related recommendations, such as:
- the EC to reflect whether to clarify auditors’ duties to report on irregularities and to grant them corresponding powers, such as the rights for the auditors to access information, in particular from employees
- rotation system in auditing teams
- joint audits for large listed entities in Europe
- ‘appropriate liability caps’ for auditors
This report has also pointed to several serious problems in the supervision of Wirecard. The SMSG recommends that ESMA investigates in more detail whether there is ground to trigger an investigation into the relevant competent authority for non-compliance with EU law.
ESMA proposes changes to Transparency Directive in response to Wirecard
ESMA published a letter it sent to the EC, calling for legislative changes to Transparency Directive to address Wirecard issues on 3 March. The audit related recommendations include:
- as part of the enforcement of financial information by National Competent Authorities, not to allow the outsourcing of the regular examination of financial information to audit firms to avoid potential conflicts of interest
- give relevant authorities/designated entities the power to require auditors, issuers, holders of shares or other financial instruments, and the persons that control them or are controlled by them, to provide information and documents
- require the issuer to have, at its cost, an independent second audit or forensic examination carried out in certain cases (such as when there are suspicions of criminal activity or highly complex cases)
- require third parties or auditors of issuers trading on regulated markets to provide periodic or ad-hoc reports concerning specific accounting issues